Client Concerns About Information Spillovers from Sharing Audit Partners
47 Pages Posted: 27 Apr 2020
Date Written: April 3, 2020
We hypothesize that companies in the same product market avoid sharing the same audit partner when they are concerned about possible information spillovers. Consistent with our hypothesis, we find that product market rivals are less likely to share the same partner when they perceive that information spillovers are more costly. While concerns about information spillovers significantly reduce the likelihood of sharing the same audit partner, we find that they do not deter rival companies from sharing the same audit office. Lastly, when companies are unconcerned with information spillovers, we demonstrate that partner sharing can be beneficial resulting in lower audit fees and fewer accounting misstatements.
Keywords: information spillovers; audit partners; proprietary costs; product market rivals; audit fee; audit quality
JEL Classification: M41, M42, D82
Suggested Citation: Suggested Citation